What do we fix first – environment or economy?

A slew of books, ebooks, pamphlets and journals are tackling the crucial relationship between environmental crisis and financial meltdown

IT IS one of the most pressing questions of our time&colon; what is the relationship between financial and environmental meltdown? Are the two crises the same thing, needing to be dealt with together? Or do we, as even some business leaders suggest, have to fix the environment before we can fix the economy? A slew of books, ebooks, pamphlets and journals are tackling this thorny question.

You might expect a strong “yes” from the greens to fixing the environment ahead of the economy. And in The Environmental Debt&colon; The hidden costs of a changing global economy, long-time Greenpeace activist Amy Larkin does make a cogent argument for this. The high costs of coping with extreme weather, pollution and declining resources are, she says, catching up with capitalism. Our carefree attitude to the “externalities” of wealth generation has generated an environmental debt that is loading unsustainable financial debt on us all.

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But environmentalists are not the only ones making the link. In Wall Street and the City, there is similar talk that the worst fears of environmentalists are coming to pass. As shortages of natural resources push up prices, a looming resource crunch is manifested in market meltdown.

Paul Donovan and Julie Hudson, economists for the Swiss bank UBS, agree. In From Red to Green?How the financial credit crunch could bankrupt the environment – a book loved by policy wonks when it came out in 2011 and now released in an electronic edition – they argue that “there is a second credit crunch”, an environmental one. By ransacking global resources and enfeebling ecosystems, the authors say, we are drawing down environmental credit as surely as reckless spending on a credit card draws down financial credit. The two crunches have “a symbiotic relationship”, they argue&colon; “The party has to stop.”

Investment strategist Jeremy Grantham warns in even starker terms of the escalating impacts of growing food and water scarcities, linked to climate change. “The days of abundant resources and falling prices are over forever,” he argued in the quarterly newsletter of his asset management firm, Grantham Mayo van Otterloo, late last year. Grantham has put some of the huge fortune he made in the world’s financial casinos into researching climate change at Imperial College London and the London School of Economics.

The synergies between financial and environmental crunches may be complex, but at root, many economists argue that reckless consumption, driven by easy credit, helped fuel financial crisis. Environmentalists agree that the same consumer binge drove up environmental debt.

But did that growing debt play a direct part in causing the financial crash? That is harder to demonstrate. The rising prices of diminishing resources such as metals, agricultural products, timber and fish were a constant theme in the run-up to the financial crisis. Now a growing number of business people believe that only by tackling environmental and resource issues head-on can they return to prosperity and growth.

Business consultant Eric Lowitt features a number of these people in The Collaboration Economy&colon; How to meet business, social and environmental needs and gain competitive advantage, a lucid primer on enlightened thinking in the business community. Among the most prominent is Paul Polman, CEO of Unilever, a global corporation that probably puts more products onto more shelves in more supermarkets than any other. Lowitt quotes Polman as saying that business has to fundamentally reform how it operates&colon; “Businesses like ours no longer have a choice.” Otherwise, he reckons, disaster looms as declining supplies of basic resources threaten bottom lines.

Of course, some will make fortunes not out of solving the environmental crisis, but by exploiting it. For every start-up looking to grow rich on renewable energy, there is a commodity speculator or land grabber telling potential investors that rising world populations will inevitably push up prices – and in terms that would make an environmentalist blush. Where greens see disaster, they only see profit.

These people are the locusts in Geoff Mulgan’s The Locust and the Bee&colon; Predators and creators in capitalism’s future. Mulgan, who was an adviser to former British prime minister Tony Blair, argues that capitalism can only thrive if it becomes “the servant rather than the master” of our ambitions.

Much the same lesson emerges from Progress or Collapse&colon; The crises of market greed by Roberto De Vogli, a social epidemiologist at the University of California, Davis. In his wide-ranging yet succinct book, he writes that “psychological and political inertia trap us in a world of climate change, water shortages, food scarcity and peak oil, from which we may have lost the ability to escape”. We have become “robo sapiens”.

The institute’s experts argue that we know how to generate renewable energy, feed 9 billion people, restore landscapes, stabilise climate and manage water, while taming corporations and improving social justice. “There is no physical or technical impediment…” If only we would get on with it, they say.

That’s good, energising stuff. And much more optimistic than Alan Weisman’s Countdown&colon; Our last, best hope for a future on Earth? We last heard of Weisman a few years ago, in The World Without Us, when he imagined how nature would reclaim the planet. Now, he says that humans do have a sustainable future – provided there are many fewer of us. “I don’t want to cull anyone alive today,” he reassures readers. “But either we humanely bring our numbers down or nature’s going to hand out a pile of pink slips [US redundancy notices]”.

I don’t want to cull anyone, but either we humanely bring our numbers down or nature does it for us

It’s a well-written book, but Weisman is a little behind the curve here. The average woman in the world today has fewer than 2.5 children, half the figure of 40 years ago. I’m not sure what Weisman plans in his “humane” programme, but even without it we are most likely heading for peak population by mid-century. That doesn’t change everything, but it changes a lot. For a start, it puts the onus where it belongs – on the overconsuming rich rather than overbreeding poor.

The links highlighted in many of these works between the two crises are strong. Most of the authors argue that dealing with them will mean we have to “deleverage”, as economists say. In other words, reduce both financial and environmental debt.

But for me, they all miss a fundamental difference between the crises. Capitalism is only a machine – a clever, resourceful machine devised to manage and grow economies. And one of the cleverest bits of that machine is how, if things go pear-shaped, we can write off financial debt, directly through bankruptcies or indirectly through inflation. We dust ourselves off and start again.

But the natural environment is not a manufactured machine&colon; it is the planet on which we live. We can’t default on climate change, write off disappearing ecosystems, or inflate away eroded soils. There is no way we can shrug off environmental debt.

The Environmental Debt&colon; The hidden costs of a changing global economy

Amy Larkin

Macmillan

The Collaboration Economy&colon; How to meet business, social and environmental needs and gain competitive advantage